Benchmark crude oil futures dropped more than $2 on markets in New York and London on May 4 as US light, sweet crude oil prices reached a 5-month low following government reports earlier in the week that estimated a smaller-than-expected decline in crude oil supplies and growing gasoline supplies.
Both benchmark crude oil markets touched lows during May 4 trading that had not been experienced since November 2016. The Organization of Petroleum Exporting Countries late last year agreed to production-cut targets of 1.2 million b/d by its members starting in January.
Some non-OPEC producers agreed to production-cut targets of 600,000 b/d for a total target of 1.8 million b/d. But lower production has failed to reduce worldwide crude oil supplies as fast as some analysts had hoped. OPEC meets on May 25 in Vienna to consider extending the production-cut targets.
“The market continues to hunt for a bottom,” Gene McGillian, manager of market research at Tradition Energy in Stamford, Conn., told Reuters. “We still have a near-record overhang and signs of increasing production in areas of the world outside the producers that agreed to the cuts.”
Goldman Sachs partially attributed the oil-price plunge to a drop across various commodity prices, which they attributed to traders’ worries about weakening Chinese economic growth.
US commercial crude oil inventories, excluding the Strategic Petroleum Reserve, decreased 900,000 bbl during the week ended Apr. 28 to 527.8 million bbl total, the US Energy Information Administration said in its Petroleum Status Report. Gasoline inventories increased 200,000 bbl (OGJ Online, May 3, 2017).
Meanwhile, traders awaited the May 5 release of the Baker Hughes Inc. rig count. Market participants are closely watching US oil production, which is increasing and which some believe could hinder efforts to rebalance world oil supply and demand.
EIA estimated US oil production at a rounded 9.3 million b/d for the week ended Apr. 28, up 28,000 b/d for the week.
Energy prices
The light, sweet crude oil contract for June delivery dropped $2.30 to close at $45.52/bbl on the New York Mercantile Exchange on May 4. The July contract fell $2.28 to settle at $45.90/bbl.
The natural gas price for June was down 4¢ to a rounded $3.19/MMbtu. The Henry Hub cash gas price fell 2¢ to $3.07/MMbtu on May 4.
Heating oil for June dropped 6¢ to $1.41/gal. Reformulated gasoline stock for oxygenate blending for June fell 5¢ to a rounded $1.48/gal.
The Brent crude contract for July on London’s ICE tumbled $2.41 to settle at $48.38/bbl. The August contract declined $2.35 to $48.72/bbl. The May gas oil contract fell $13.25 to $426/tonne.
OPEC’s basket of crudes was $47.44/bbl on May 4, down 90¢.
Contact Paula Dittrick at [email protected].
